Scorpio Tankers (NYSE:STNG) Has Announced A Dividend Of US$0.10

The board of Scorpio Tankers Inc. (NYSE:STNG) has announced that it will pay a dividend on the 15th of June, with investors receiving US$0.10 per share. This means the annual payment will be 1.6% of the current stock price, which is lower than the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Scorpio Tankers' stock price has increased by 82% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Check out our latest analysis for Scorpio Tankers

Scorpio Tankers Might Find It Hard To Continue The Dividend

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. While Scorpio Tankers is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

Assuming the trend of the last few years continues, EPS will grow by 28.8% over the next 12 months. We like to see the company moving towards profitability, but this probably won't be enough for it to post positive net income this year. The healthy cash flows are definitely as good sign, though so we wouldn't panic just yet, especially with the earnings growing.

Scorpio Tankers' Dividend Has Lacked Consistency

It's comforting to see that Scorpio Tankers has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The first annual payment during the last 9 years was US$1.00 in 2013, and the most recent fiscal year payment was US$0.40. Doing the maths, this is a decline of about 9.7% per year. A company that decreases its dividend over time generally isn't what we are looking for.

The Company Could Face Some Challenges Growing The Dividend

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. We are encouraged to see that Scorpio Tankers has grown earnings per share at 29% per year over the past five years. While the company hasn't yet recorded a profit, the growth rates are healthy. If profitability can be achieved soon and growth continues apace, this stock could certainly turn into a solid dividend payer.

Our Thoughts On Scorpio Tankers' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 3 warning signs for Scorpio Tankers that investors need to be conscious of moving forward. Is Scorpio Tankers not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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